The Securities and Exchange Board of India (Sebi) has decided to allocate the unutilised limit for corporate bond investments through a bidding process on the Bombay Stock Exchange (BSE). In April, 2010 around 18 foreign institutional investors (FII)s were allocated corporate debt worth $4.4 billion (Rs 20,000 crore), while government debt worth $ 0.4 bn (Rs 2,000 crore) were allocated to 11 entities. Currently, the limit for overseas investment in to the government debt is capped at $ 5 billion and corporate debt at $ 15 billion.
With a huge amount of money flowing into the Indian debt paper this year, the regulator in April had reduced the limit for corporate bonds, which can be allotted to individual FIIs to Rs 2000 crore from the earlier limit of Rs 10,000 crore, while the minimum amount that can be bid for, had been fixed at Rs 200 crore. For government debt, the limit has been lowered to Rs 200 crore from Rs 300 crore.
FIIs have, till date, made a cumulative investment of around $ 14.26 billion of which close to 50% or $ 6.80 bn worth of investments came in 2010 according to the data available with Sebi.
Already, the yields offered by Indian companies are higher than what investors would get overseas for a similar risk profile making the Indian market more attractive than its global peers. Then, local currency appreciation(against the dollar) also has been providing additional kicker to overall returns for the investor.